On paper, Landmark on the Lake, one of Milwaukee's largest condominium developments, has sold two-thirds of its 275 units.

In reality, some of those sold condos are still for sale. Their new owners bought them as investments but were unable to resell them once the housing bubble burst. So, condos at Landmark and other east side and downtown developments are being rented out as apartments while the owners wait for demand - and prices - to rebound.

"This is not the time to sell," said Chicago investor Irene Slusarenko, who owns five condos at Landmark, 1660 N. Prospect Ave. "Hopefully, within five years, things will change enough so it won't look like doom and gloom so much."

Investors such as Slusarenko, who bought condos at peak prices, are now covering their monthly mortgage payments with rental income from those units. But the rents sometimes fall short on covering property taxes, so the owners dig into their savings to cover those expenses. Meanwhile, the shadow market condos are adding to the current oversupply of units, which can make it harder for developers to obtain financing to build new downtown condos.

The flip side: condo buyers have found a few bargain-priced units. But, for now, most units purchased by investors are being rented out instead of being listed for sale.

"(Sellers) aren't willing to take that discount, or take that hit," said Hipp, whose firm helped finance 601 Lofts, a new condo building at 601 E. Ogden Ave., just north of downtown.

Shawn Vinik hopes to avoid that hit.

He was renting an apartment at Landmark when the building was sold for $56 million to Chicago-based NVG Residential Inc. NVG in 2006 began converting the apartments to condos. Vinik bought a unit with plans to live there for a while before selling it as investment within five years.

However, Vinik, who operates his own marketing firm, moved to San Diego last year, as demand for condos was sliding. He's renting out the Landmark condo, which covers his mortgage payment but not $7,000 in annual property taxes. Meanwhile, the unit's assessed value is $292,300, a 25% plunge from Vinik's purchase price of $391,500.

Vinik wonders if he should sell the unit now and eliminate the property tax expense, or wait it out until condo prices go up.

Slusarenko and her husband, Jerry, bought their Landmark units in 2006. They had planned to move to Landmark when Jerry Slusarenko, a chiropractor, retired in a few years. The couple bought additional condos as investments.

Those retirement plans are now on hold, and all five units are being rented out. Irene Slusarenko said one-bedroom units at Landmark are renting for around $1,200 to $1,400 a month, but she needs $1,600 to $1,800 to break even.

Like Vinik, the Slusarenkos cannot raise the rents high enough to cover their property taxes. They're tapping other real estate income to make up the difference.

Long-term approach

NVG's Australian lender, Rubicon America Trust, took control of the 28-story Landmark a year ago. Rubicon hired local real estate investor Richard Ruvin and Milwaukee-based Fiduciary Real Estate Development Inc. to manage the development. They quickly cut condo prices by as much as 15% and remodeled Landmark's lobby, clubhouse and fitness center.

Since 2006, 184 condos have been sold at Landmark, including 72 units to buyers who do not live in the building full time, Ruvin said. That includes people who use the condos as second homes, corporations seeking employee housing and investors.

Of the investors, Ruvin characterizes less than 25 owners as speculators who had hoped to quickly resell the unit, a practice known as "flipping." He said investors with a more long-term approach, who made 20% down payments and borrowed less money than the speculators, are much more able to cover their mortgage and tax payments by renting out their units.

Ruvin and Fiduciary are among the long-term investors. In October, they bought 100 units from NVG for $10.8 million and will take around three years to re-sell those condos. That evenly paced approach will help protect other Landmark investors by shoring up sale prices, Ruvin said.

"We're not looking to sell this out in a matter of months," Ruvin said.

Still, conflicts can arise in the shadow market.

At The Point on the River, developer Scott Fergus agreed to sell nine condos to groups led by investor Ron San Felippo, just before construction began on the 152-unit project in 2005. A court-appointed receiver last year took control of The Point, 106 W. Seeboth St., and now wants a judge to toss out those pending sales contracts.

Receiver's contention

Receiver Michael Polsky said the collective sales price would be around $600,000 less than the total market price of the condos. Allowing the sale to occur would hurt the project's creditors, led by Madison-based AnchorBank, which are owed tens of millions of dollars, while also affecting the ability to sell the development's remaining units at market prices, Polsky said.

San Felippo said Fergus didn't offer discounted prices to the investors and said the investors' contracts should be honored. San Felippo also denied claims by Polsky that his groups had planned to flip the condos.

Instead, San Felippo said, he and his partners would likely hold the condos until the market rebounds.

"If we leased them out for a couple of years, depending on the market, that wouldn't necessarily be a problem," San Felippo said. "Long term, we would look to sell."

Shadow market numbers

The shadow market may account for 15% to 20% of the overall number of east side and downtown condos, said Robert Monnat, chief operating officer for housing developer Mandel Group Inc.

Prospective lenders for downtown condo developments will take a close look at the shadow market as part of their due diligence when considering new loans, he said.

"It will be a factor," said Monnat, whose firm is helping sell units at The Point.

But Milwaukee's shadow market has not had a big dampening effect on condo prices, Monnat said. That's because most units held by investors are being rented out until prices rebound, he said.

If investors can afford to be patient, Ruvin said, sales prices eventually will rebound.

But the market isn't going to revive anytime soon, said Hipp, of Hexagon, which owns around 20 units at 601 Lofts. Hexagon was an original investor in that 80-unit project, which Fergus developed before losing control of the project because of his financial troubles.

"This year is going to be very, very slow," said Hipp, whose firm is renting out the condos it owns at 601 Lofts. "Who knows, really, what 2010 will bring?"

Irene Slusarenko said she and her husband, with real estate investments elsewhere, can afford to wait.

Milwaukee "still seems like a great city," she said. "We still want to retire there."